Dedicated risk management line of credit

Abstract

A dedicated line of credit restricted to use for eligible demands from claimants, and a method for managing the retention of risk. The dedicated line of credit is available for an amount of time roughly equal to the term of coverage of a corresponding insurance policy. The method for managing the retention of risk comprises determining an estimate for the amount of future claims, calculating the cost of insurance, determining the entity's optimum amount of retained risk and providing a mechanism to pay the portion of claims for which the entity has retained responsibility.

Description

[0001] Provisional Application Serial No. 60 / 391,481, filed Jun. 25, 2002[0002] Not Applicable.[0003] 1. Field of the Invention[0004] This present invention relates generally to a financial service product and system of risk management and, is more specifically directed to a dedicated line of credit and methodology for managing a person or entity's amount of retained exposure to future undetermined liabilities.[0005] 2. Description of Related Art[0006] Traditionally, entities, whether individual or corporate which are not insurance or re-insurance companies, protect themselves against perceived risks by purchasing insurance. Risks may include damage to property, liabilities, medical costs, disability and loss of life and if the entity is an employer, these risks may also include employee benefit programs and other coverage necessary to maintain business relationships. However, due to economic pressures on insurance carriers, premiums paid by all entities have continually increased.[...

AI Technical Summary

Problems solved by technology

Risks may include damage to property, liabilities, medical costs, disability and loss of life and if the entity is an employer, these risks may also include employee benefit programs and other coverage necessary to maintain business relationships.

However, due to economic pressures on insurance carriers, premiums paid by all entities have continually increased.

Economic pressures also have caused the insurance carriers to limit the number of plans they offer so that in many instances only higher deductible programs are available.

The result, for some lines of coverage, is that premium increases have continued to escalate and that lower deductibles are no longer available, even if the premium was affordable.

This has also put more pressure on entities to retain risk and left them with the consequences of an uncertain expense category, which is a risk to assets and financial stability.

In spite of the significant adverse financial and reporting consequences, an entity may retain the entire risk for some types of potential losses and buy insurance that protects them only in the event of a large catastrophic specific loss or the aggregation of several losses.

On the other hand, due to a lack of certainty in loss projections and the potential risk to assets in order to satisfy the payment of claims, some entities are willing to retain only a minimal amount of risk.

Such asset liquidation may be adverse to growth and revenue stability.

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